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Reduced Cow Slaughter Will Support Cull Prices

For the balance of 2013, analysts with the Livestock Marketing Information Center expect cull cow prices to decrease less than seasonally normal due to the reduced beef cow slaughter fueled by expansion plans.

“Expectations for lower corn prices and resurgent calf prices also are providing an incentive for producers to retain heifers and reduce cow culling in an effort to maintain/expand herds decimated in recent years. Heifers held back for beef cow replacement have increased in the last two years, up 123,000 head in 2012 and 99,000 head in 2013,” say Len Steiner and Steve Meyer in their September 10 Daily Livestock Report. “Despite the increase, the beef cow herd has declined sharply as producers faced with poor margins and insufficient supplies have been forced to liquidate. The beef cow inventory was down 692,000 head as of Jan, 1, 2012 and down 863,000 head as of Jan. 1, 2013. More heifers coming in at a time when producers are liquidating implies that the supply of cull cows this fall will be particularly limited.”

The Livestock Marketing Information Center (LMIC) expects U.S. Federally Inspected beef cow slaughter to end this year 125,000-200,000 head less than in 2012.

“Between early July and mid-August, weekly FI beef cow slaughter ranged from 5% to 9% below 2012’s. In the last two weeks of report data, the year-on-year declines were 13% and 14%, respectively,” LMIC analysts said last week. “For the balance of 2013, forecasts call for 10% or larger declines from 2012 levels. Those declines will support cull cow prices above 2012 for the balance of this year. Seasonally, cull cow prices normally erode into the fall quarter of the year; this year that price erosion is expected to be less than normal.”

The other side of the equation means fewer cattle overall in the marketplace next year.

“At this point, there is broad expectation for beef cow slaughter in 2014 to decline sharply, likely by more than 15%.” Meyer and Steiner say. “To that decline, add the reduction in feeder imports (see below) and heifers held back for replacement to get a full picture of the kind of beef supply reductions, especially the supply of lean beef coming to market in 2014.”